Julie Lein, Managing Partner at the Urban Innovation Fund
John Haugen, Sustainability & Green Building Consultant, Principal & Client Director at Third Partners.
Sustainable Workplace Post-COVID: Healthy Buildings and Impact Investment Opportunities
Episode 26 | Duration: 15 minutes
Could sustainable buildings have reduced the spread of the virus? Can they help us prevent future outbreaks? Will cities remain the economic powerhouses, and how can companies manage work processes safely? There are certain opportunities that responsible investors can tap into right now...and certain measures corporate offices in cities will have to take to start reopening.
Keesa Schreane [00:00:00] Cities are home to 82 percent of the U.S. population and two-thirds of the world's population will be urbanized by 2050. As we've seen with COVID-19, cities can act as a catalyst for the spread of a highly contagious pandemic. Today, we'll discuss urban resiliency and how cities can help themselves to combat the spread of the virus - this virus and others - and how cities can be recreated in a more sustainable way.
[00:00:29] Joining us today is Julie Lein, co-founder and managing investor of Urban Innovation Fund, a V.C. firm that provides capital for startups that look to tackle challenging urban issues. Julie, thank you for joining.
[00:00:45] So, Julie, let's just jump into the dynamics that are happening in cities right now with COVID, we see that some are opening back up. Some continue to be shut down. How are these dynamics really impacting a sustainable city model?
Julie Lein [00:01:02] Yeah, I think right now is a real inflection point in terms of the future of cities. I think from a high - level perspective, you talked about a lot of the trends that we've seen from a population and economic perspective, mainly that cities are economic and innovation powerhouses. There are over four billion people currently living in cities and according to some, there are roughly 600 cities that generate two-thirds of the global GDP. So, you know, from a big picture perspective, I think cities continue to be incredibly influential.
Keesa Schreane [00:01:34] Speaking of reimagining these urban areas and what comes out on the other side, let's talk a bit about some of the resiliency that you see right now that's set to happen. Do you see any patterns emerging at this stage or do you expect that to be more of a longer-term play?
Julie Lein [00:01:51] Yeah, I mean, I think that what we're seeing is an acceleration of trends that I would call covered tailwind trends, if you will. Some of those trends include the future of work and remote work that had been a trend that was starting already and I think it was just really hyper-accelerated with the pandemic. I think that's still a huge area of opportunity and an area that we've been investing in quite prolifically.
Keesa Schreane [00:02:16] I'd love to talk about the future of work and what that looks like specifically as it relates to how investors might be able to participate or invest in these opportunities. Are we talking about green buildings or are we talking about construction? What does the future of work really mean in a practical sense?
Julie Lein [00:02:35] There's definitely been a push to, you know, what can you do to make buildings healthier, more sustainable. I think that's where some of the green buildings push has come in. And it's very exciting to see and hopefully, it's a trend that continues getting accelerated.
[00:02:50] Another example I would point out is we invested in a company called Catch Financial. They provide a portable benefits platform for all workers with a specific focus on gig economy workers. So if you are a gig economy worker, you can go to their platform and get access to health insurance, life insurance, retirement benefits, paid leave. You can estimate and pay your quarterly taxes. They're really providing this social safety net, if you will, for these workers that unfortunately are in a very unstable position and oftentimes don't get any benefits from their employers. I think, you know, as we're thinking about the future of work, we have to recognize that this is disproportionately impacting low-income individuals in a really negative way. I think they were saying something like only nine percent of workers in the lowest income quartile can actually work from home compared to sixty-two percent in the upper quartile. We really see a big opportunity in helping fill in those gaps, especially for low and moderate-income employees. And we're really excited that Catch does just that.
Keesa Schreane [00:04:07] This is really interesting, and there's clearly a social impact play as well. Julie Lein, thank you so much for joining us.
[00:04:16] And now we're speaking about viruses and the coronavirus, specifically in the context of buildings. How will we move forward with our new offices? What will the office space of the future look like? Here to help us and give us some insight into this is John Haggen, principal, and client director at Third Partners. John, thank you for joining us. So can we first get an understanding of the differences just to level set the differences between sustainable buildings, healthy buildings, and green buildings?
John Haugen [00:04:53] Sure. I would consider a sustainable building one that is both green and healthy. A green building primarily focuses on the relationship the building has with the environment. And in most cases, it focuses on resource consumption, energy use, water use, etc. A healthy building is the one that focuses on maximizing the health of building users and occupants and ensuring that when somebody enters a building. For the time they are in that building, their physical health is enhanced as much as possible.
Keesa Schreane [00:05:41] Great. So it sounds like sustainability covers both. And then we have the differences between green and healthy. So with that being said, with where we are now, with our health concerns, with the pandemic and even with future pandemics that we suspect will come in in the future. What are the important aspects of both green buildings and healthy buildings? And you mentioned healthy in terms of maximizing the health of the occupants. Let's start with that one.
John Haugen [00:06:11] A healthy building must have clean air. It must provide clean water. Access to light that reflects the time of day and helps facilitate natural circadian rhythm must prevent sound transfer between spaces suitable for the actual program of the space. And in certain cases, it can enhance people's physical well-being by facilitating circulation through the building, walking up and downstairs, corridors that are friendly to walk through the placement of plants and things that are engaging to the human mind.
[00:07:04] Essentially, it covers top-to-bottom, any type of experience one would have in a building. Everyone's worked in an office building that has done a poor job on all of those things. And that's kind of the stereotypical office of the 80s. The healthy building movement is to create a building that's essentially the antithesis of that and facilitates all the different body systems that we rely on on a daily basis to stay healthy.
Keesa Schreane [00:07:37] So a healthy building, in theory, could have prevented the spread of COVID, or could have greatly reduced the spread of it.
John Haugen [00:07:49] When you think of a virus like the COVID-19 and how it spreads, building systems, and how a building is designed, is one critical part of the equation. There is also a human interaction component to it that's equally important. That involves space planning and how offices are configured. There's also a janitorial and maintenance component of it. How well filters are changed out with an air handlers. What materials are being used for cleaning and disinfecting of high touch surfaces, surface types, you know, porous surfaces vs. hard surfaces. Essentially, it's part of the building's design and part of it as how it's operated and who's inside of it and how they are required to interact with each other.
[00:08:56] So I think in general, the answer is yes. A healthy building can reduce the spread of something like the coronavirus, if done correctly, in concert with maintenance and space planning.
Keesa Schreane [00:09:10] Ok, Thank you for that. If we're looking toward the future, employees may be coming back to offices soon, even if in greatly reduced numbers. How can we keep these buildings safe from future viruses? So if we're looking beyond COVID, what can we do in the future to make sure that our buildings are healthy right now? Starting today.
John Haugen [00:09:34] We wrote a guide to reopening a few weeks ago and the CDC actually came out with one last week and I was pleased to see that a lot of the things we covered were also covered by the CDC. There's a strong ventilation requirement or component of this where building systems should be maximizing ventilation rates. Air filters that are used on air handlers need to be upgraded to the highest standard possible. I know a lot of buildings do have HEPA filters, high MERVE filters that filter out a lot of different harmful particulates and microorganisms. But it's really as good as the facility manager and their knowledge of those filters. It obviously costs more to get a better filter. And so, you know, there's also a cost component to this, but essentially filtration is a huge component of it.
[00:10:40] The janitorial and maintenance component pretty much boils down to finding a product that is a CDC-rated disinfectant and all the high touch surfaces need to be disinfected multiple times a day.
[00:11:03] Space planning. There's a court order management component where you should never have corners where employees are passing in proximity. Usually, this requires changing two-way corridors into one-way corridors and putting arrows on the floor, reducing the concentration of employees in open office plans. The open office plan trend from the past 15 - 20 years has not really been designed with a pandemic in mind, and there's going to need to be some walking back of those open office plans. Companies will need to think about how closely people can be sitting next to each other and, you know, basically reducing the density of employees within open offices. One important component is wearing masks at all times. I think that's not a comfortable thing for people to think of. But the policies that are recommended by the CDC. The policies that really are recommended, if you've read any of the data on how this spreads, people should be wearing masks at all times if they're in an office.
Keesa Schreane [00:12:24] Still, with that being said, we're hearing it, and thank you for that thorough review, I'm sure a lot of people are hearing you say great things. They're agreeing, but they're thinking, wow, this sounds pretty cost prohibitive. Could you let us know when you expect these shifts to be adopted broadly by the marketplace, given that there is going to be a cost assigned to these things?
John Haugen [00:12:48] I honestly would say I expect it to be more on the company level than on a broad marketplace adoption level. There's a lot of wishful thinking happening right now, at least in the anecdotes that I've noticed and among with the people I've spoken with - executives, managers, facility managers, portfolio managers and folks that are in charge of when and how people go back are. They are wishfully thinking that going back now is safe based on no evidence, based on the fact that it's already been an uncomfortable couple of months of people working from home. And everyone wants to get back to normal. And I think they're using some sort of gut feeling, instead of evidence.
[00:13:46] The best companies, the right companies that are going to be doing this correctly are going to be spending a lot of money. In fact, they'll probably be spending whatever it takes to make sure that their offices are as safe as possible. The cost of human resources and the human capital that is employed in the buildings is going to be is and always has been and always will be much higher than the cost of any of these interventions. And so as a percent of your staff costs, it's pretty miniscule. So in most cases, companies should be spending whatever it takes to adopt all of these measures.
Keesa Schreane [00:14:29] Well, John, thank you so much for joining us. We are reimagining green cities, green buildings and infrastructure, and architecture and the way that we haven't before for institutional investors. This will likely present a huge opportunity now and for the foreseeable future.
[00:14:47] We invite you to subscribe to the definitive Sustainability Perspectives podcast on iTunes, Spotify, or where ever you stream your content. What did you think about the podcast? Leave us a review on iTunes or follow us on LinkedIn and Twitter for updates on our show. You can even check us out on YouTube now. Thank you for joining. See you next time.